The environment within which WtW grantees and programs operate is defined by the economy and by policies governing TANF and WIA. One might expect that both the local economy and state or local policies might affect WtW program operations, or cause administrators to change their service delivery system in some way. In general, though, we found that WtW grant-funded programs in the study sites have not made service delivery changes in response to the economy, TANF policies, or WIA policies. While the slow economy has reportedly affected how quickly participants are able to enter employment, administrators in most sites indicated that they did not find it necessary to change their programs because of the poor economy. Neither have the programs made changes because of the TANF time limits, in part because very few participants in these programs have reached their TANF time limit. No major changes were made to these WtW programs as a result of One-Stop Centers or WIA policies either. However, several program administrators noted that state TANF funds were becoming increasingly tight and that in some places TANF funds for work activities and related support services such as child care have been reduced and that those reductions affect WtW programs. That is, the fiscal effect of the poor economy on state budgets has affected some WtW programs that depended on state-funded services for their participants.

In addition to requesting an update about the status of program operations, we asked administrators in the study sites about adjustments WtW grantees and program operators made in response to policy developments. We asked (1) whether there have been any WtW program adjustments as recipients started to reach their TANF five-year time limit or because of any other TANF policies; and (2) whether there have been any operational changes related to the full implementation of the Workforce Investment Act and One-Stop Centers, given that many of the WtW grantees were WIA administrative agencies.

The vibrant economy that existed in the late 1990s when the WtW grant-funded programs were starting up cooled considerably after 2001, affecting not only the labor market, but the fiscal condition of states. Since the primary objective of the WtW grant-funded programs is to assist individuals in obtaining jobs that can lead to self-sufficiency, labor market conditions can figure importantly in how programs attempt to accomplish this objective. We were interested in learning about any programmatic changes that were made in response to the economic slow-down and whether there were any changes in the role that employers play in the programs.

Despite declining economic conditions in the sites, administrators reported that they had not made any major changes in their programs or client services in response to the economic slow-down. Most of them noted that participants were still able to find jobs in 2003, although compared to prior years, it was taking longer, most had fewer job options, more were in part-time or temporary jobs, and the starting wages were somewhat lower.

To some extent, administrators seemed to have already factored in an understanding of their local labor market in designing their programs, meaning that when the economy slowed down no major program changes were considered necessary. For example, in sites that had relatively high unemployment rates even in the late 1990s (when the economy was generally very strong) or that typically have seasonal economic cycles, the design of the WtW programs had already incorporated a variety of components, such as community service jobs, that did not depend on rapid job placement.

Economic conditions in all the study sites, as in the nation as a whole, began to decline in early 2001, and median unemployment rates in 2002 were about 2 percentage points higher than in 1999. (Exhibit 5) The greatest increases in unemployment occurred in Chicago (rose from 4.1 percent in 1999 to 6.7 percent in 2002), Fort Worth (3.1 percent to 6.1 percent) and Milwaukee (3.1 percent to 6.0 percent), and in some Indiana counties and West Virginia. Other sites had relatively high unemployment rates even in the late 1990s — West Virginia's unemployment rate was 9.2 percent in 1999 and 8.1 percent in 2002, and Yakima's was 10.0 percent in 1999 and 10.3 percent in 2002.

(b) 2000 estimates benchmarked by BLS based on 2000 Census and CPS and used in subsequent annual estimations.
(p) Preliminary monthly average, January-August 2003
Source: Bureau of Labor Statistics, Local Area Unemployment Statistics

In other words, even though their labor market conditions were stronger than usual in the 1990s, in designing their WtW programs, directors understood that many welfare recipients would not be able to find jobs in the regular market. The WtW plans, for example, generally involved special services, components and employability development strategies for individuals with job barriers even when the labor market was strong. In West Virginia, for instance, where HRDF serves individuals in over twenty, mostly rural, counties, their WtW program model emphasized subsidized jobs and wage supplements. Similarly, in Yakima, the WtW grants program also included a major subsidized community service jobs component, recognizing the difficulty low-skilled workers have in that labor market with high seasonal employment fluctuations and little new economic development. In Nashville, the Pathways model was adopted because administrators felt that TANF recipients with multiple barriers and little work experience would benefit from Pathway's structured and individualized developmental plan, peer support, and a strategy that involved taking gradual "steps" towards employment.

In contrast, though, some grantee programs in local areas that experienced very large increases in unemployment in 2002 have been noticeably affected by the economy. In Boston, where the unemployment rate went from 2.2 percent in 2000 to over 5.0 percent by early 2003, the economy did have an effect on the WtW grant-funded programs, all of which implemented an employer-partnership model. Nearly two dozen partnership programs had been funded with WtW grants, each consisting of one or more businesses and one nonprofit community-based organization that provided intensive case management. Employers helped design the pre-employment components, contributed financial and in-kind resources, and guaranteed jobs to those who completed the program. The continuation of the employer partnership programs beyond the period of the WtW grant funding has been very limited, in part because even businesses that are supportive of the approach cannot guarantee that they will be able to hire participants who complete the program. Only two businesses (Marriott and Partners Health Care) are funding and continuing the partnership models.

In all the other study sites, administrators indicated that their participants were still able to find jobs, but that it seemed that the job search period was taking longer than it had in 2000 and 2001. No major programmatic changes were considered necessary, however, presumably because staff and counselors had flexibility in how they help participants approach their job search and employment preparation. There is no evidence in any of the sites, for example, that programs shifted to training or education rather than direct employment.

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